Estonia’s Prime Minister Kristen Michal has ordered the Riigikogu to review a tax deduction included in the country’s 2026 Budget legislation.
The measure was originally presented by coalition supporters as part of a broader ambition to establish Estonia as a European technology and services hub for the multi-billion-euro online gambling sector.
Backers of the policy pointed to Malta as a model, arguing that Estonia could mirror the EU member state’s success in attracting international iGaming operators and associated investment.
Supporters also argued the policy’s impact could only be judged over several years, given that licensing and relocation decisions by operators typically take considerable time to complete.
However, the Finance Ministry had warned that the reduction could lower gambling-tax receipts by approximately €6m in 2026, rising to €8m in 2027, €10m in 2028, and €13m in 2029 if the anticipated influx of operators failed to materialise.
Michal’s own Reform Party backed the legislation despite opposition from some of its own MPs, who questioned both the financial projections and the risks of attracting more international casino businesses to the country.
The intervention comes at a particularly sensitive moment, as Michal’s government attempts to reconcile competing budgetary demands ahead of the 2027 fiscal cycle.
Estonia forecasts economic growth of 2.5% in 2026, but the general government deficit is expected to reach 4.4% of GDP, exceeding the EU’s standard 3% reference level by a notable margin.
The country has also raised defence expenditure to more than 5% of GDP in response to the continuing security threat from Russia, a commitment regarded as a national priority that leaves reduced fiscal space for healthcare, education, culture, and other public services.
The coalition is simultaneously maintaining its proposal to introduce a universal €700 monthly tax-free allowance, described as the first such measure by an EU nation, which will increase household disposable income but place further pressure on government receipts.
Michal’s negotiating position is further complicated by a weakened parliamentary majority, with the Reform-Eesti 200 coalition controlling only 50 of the Riigikogu’s 101 seats following the departure of two MPs from the governing parties.
The combination of rising defence costs, a bold social policy commitment, a widening deficit, and now uncertainty over iGaming tax revenues means Estonia’s government faces a genuinely difficult balancing act in the months ahead.
